February 17, 2011 – Is 2011 finally the year when the long-discussed opportunities for service providers to deliver residential energy management services will actually translate into real revenues?
While many issues remain to be resolved before MSOs and telcos can get to a market scale that might generate ROI on the service investment, there are many reasons to believe the time has come to start down this path. After all, the case seems stronger than ever that a bi-directional energy management communications network will lead to lower power bills, lower capital outlays by utilities, reduced greenhouse gas emissions and a more reliable power grid for society.
Appearing at the recent Parks Associates Energy Summit in Austin, Texas, Roy Perry, director for strategic assessment at CableLabs, voiced optimism that viable business models could be found for independent (non-utility) residential energy management (iREM) services.“I’m a lot more bullish about the opportunity than I was before I came to the conference,” Perry said, noting that he had confirmed there are working solutions and products that can be sold today “that are ready for primetime.” (To view a ViodiTV video interview with Roy Perry, click here).
One factor underlying the progress toward real-world potential is the emergence of the communications capabilities within the power infrastructure that not only make for a “smart grid,” but also enable the connection between that smart grid and smart meters in the home via utility-managed HANs (Home Area Networks). What began as one-way meter reading capabilities over telephone lines via the Automated Meter Reader (AMR) protocol is now evolving to a full two-way Advanced Metering Infrastructure (AMI), which integrates the ZigBee wireless communications protocol for connecting over HANs.
Smart meters with ZigBee connectivity built in are now in 20 percent of U.S. households, according to energy industry reports. But utilities have failed to seize the momentum to drive HAN usage, which opens an opportunity for iREM as a market force that could persuade consumers to exploit the benefits that come with monitoring and controlling power consumption on individual appliances and electronic devices.
Parks Associates identifies several reasons why utilities have been slow to drive HAN usage, including: the absence of a ratified Smart Energy Profile (SEP) 2.0 for better control functionalities; cautious approaches born of inexperience in the networking business on the part of utilities; the hassles of obtaining PUC approval for such activities, widely varying regulations from one region to the next and the educational efforts needed to drive consumer participation. Yet, given the intensifying search by federal and state governments for energy savings and smart-grid utilization combined with the growing technology foundation for applications built into appliances and CE gear of every description, the market appears ripe for a push from entities better versed in delivering residential network services.
The delay in HAN activation will give rise to a viable iREM market, comprised of broadband service providers, alarm companies, HVAC suppliers and retailers, Parks asserts. It. forecasts that by 2015 over 10 million households will have an iREM Net compared with less than 6 million with a utility-based HAN.
To facilitate the iREM market, CableLabs’ Perry called for an open market in energy management, so that consumers can shop around for products and services to manage their energy needs, as well as participate in demand response programs to facilitate a more efficient grid. He proposed a focused approach, whereby initial rollout of smart meters and associated smart-grid elements would be to those homes that are higher energy consumers, as opposed to bringing it to homes where the benefits are marginal.
If meter data and grid status were provided on a common foundation, “then third parties could provide energy management services on a national basis,” Perry said. That would allow the federal government to meet the objectives they have been espousing, which is to have; wide-spread energy management capabilities and demand-response programs without tying it to any particular utility’s agenda. “No matter where you lived, you could buy these services and be assured that it would work with your particular energy provider,” he said.
With an open market, new players might enter and new business models might evolve that, for instance, would see value in the metadata of consumer’s energy usage. Perry suggested that entities like Google or Microsoft might actually pay consumers for information on their energy usage, as this could be valuable data for third-party advertisers. Overall, he said, the business model would work because there would be enough beneficiaries in the mix, including utilities, service providers, the government, consumers and advertisers on which to build a solid revenue foundation.
But the question then becomes, what will steer the market to that common technology foundation so as to facilitate off-the-shelf, national consumer participation? The Association of Home Appliance Manufacturers, whose members represent over 95 percent of home appliances sold in the U.S., recently took a step in this direction with creation of the Smart Grid Task Force to identify which of some 60 home networking and applications protocols are best suited for integration with home appliances (To view a ViodiTV video interview with AHAM’s Kevin Messner, click here).
AHAM found that communications protocols Zigbee, WiFi and HomePlug Green PHY, along with application protocols OpenADR and SEP 2.0 rose to the top. Commenting on the study, Kevin Messner, vice president of government relations for AHAM, said, “We don’t want an appliance that you purchase in Oregon not to work when you move, say, to Florida. We need a small number of protocols that ideally will be open.”
To date, manufacturers have been reluctant to add cost to their appliances without knowing the consumer will see value and, hence, pay a premium for home appliance. But this is changing as was evidenced at this year’s CES where big suppliers like Samsung, LG Electronics and GE announced they were integrating Zigbee and other energy management features into various models of higher-end appliances.
In GE’s case, Zigbee will be encased in a module that will allow the manufacturer to provide other technologies as standards evolve. “Keeping an open mind, we know there are other protocols and there are technologies that will bridge the gaps, and we hope with SEP 2.0 will help corral it into a set standard,” said J.T. Thompson, smart appliance utility leader of GE’s Home Energy Management unit.
“We all anticipate that there will be mixed environments where homes will incorporate multiples of these technologies,” said Greg Ennis, technical director of the WiFi Alliance, “There is a tremendous amount of collaboration that is going on within the whole smart-grid world. The government’s Smart Grid Interoperability Panel is driving a lot of it. One good example of collaboration is the work that WiFi Alliance is doing with the Zigbee Alliance to make sure that SEP 2.0 works over WiFi and Zigbee, as well as other technologies.”
Beyond getting to some degree of compatibility, there’s a big hurdle to clear in educating the consumer not only on the value of connecting to the smart grid but also on how to choose devices that are compatible with widely supported protocols. “It is going to take a concerted effort from the utilities standpoint, from the consumers’ willingness to learn, but also from us as a vendor/provider of these devices inside the home to really try to baby step the consumer along so they feel comfortable about the decisions they are making in how they are using their energy and the ways they can save,” said GE’s Thompson.
Fundamentally, consumers must understand what’s in it for them to upgrade appliance and install iREMs, said Bill Ablondi, director of home systems research at Parks Associates, He suggested vendors should “think of the customer and not just of the technology – think of the up-sell.”
One measure of what’s in it for them comes from AHAM. The organization says consumers could realize a $900-million annual savings by shifting just five percent of their peak power usage to non-peak times.